Green Cross Health is still in talks with district health boards and the Ministry of Health over the pay equity settlement which has left it underfunded and facing a bigger leave liability.
The private healthcare provider and pharmacy chain reported a net profit attributable to shareholders of $8.1 million in six months ended Sept. 30, down from $8.8 million a year earlier. Much of the decline in earnings came from its community health division, which provides community nursing services and home care health through its Access Community Health and Total Care Health Brands.
That division received an extra $4.8 million of revenue in the half as part of the government’s pay equity settlement – which increased wages for 55,000 aged and residential care workers – although that didn’t cover the added cost, something Green Cross noted in its annual earnings. The unit’s operating profit plunged 80 percent to $269,000 even as revenue rose 15 percent to $78.1 million.
“Revenue growth did not translate to profit due to the continued shortfall in funding and an increase in leave liability due to pay equity,” the company said in a statement. “Discussions continue between industry representatives and the Ministry of Health and district health boards on this issue.”
Chair Peter Merton told shareholders in July that the government had said pay equity and guaranteed hours changes would be fully funded, but that hasn’t been the case.
The company’s March 2018 annual result was weighed down by a $1.9 million increase in its leave liability as a result of the pay equity deal, and it booked another $404,000 charge in the latest half.
Green Cross expects to improve the community health unit’s profitability by targeting segments with higher clinical needs, quitting unprofitable contracts and sharpening up its operating efficiency.
The unit’s wage bill rose 18 percent in the half to $74.7 million, and may face further pressure if the August deal between DHBs and nurses spills over into private operators as Green Cross anticipated.
The company’s Unichem and Life Pharmacy business posted a 3.8 percent decline in operating profit to $13.9 million on a 2.2 percent increase in revenue to $170 million. A mild flu season, where fewer people got sick, saw an 8.6 percent decline in cough/cold and pain medication.
Green Cross said the government increased industry-wide funding by $20 million in a new pharmacy services agreement put in place during the period. The deal seeks to provide funding certainty for dispensing medicines and a framework for commissioning local services.
The company’s medical services unit was the highlight for the company, lifting operating profit 32 percent to $2 million on a 37 percent increase in revenue to $34.3 million. Green Cross added three medical centres to The Doctors network, which now numbers 41.
The board declared an interim dividend of 3.5 cents per share to be paid on Dec. 21 with a Dec. 5 record date. That’s unchanged from a year earlier.
The shares last traded at $1.19 and have slumped 28 percent so far this year.